Which factor does NOT contribute to increasing a homeowner's equity?

Home equity is essentially the portion of a home's value that the owner actually owns outright, which is calculated by taking the current market value of the home and subtracting any outstanding mortgage balance.

When considering the factors that contribute to increasing a homeowner's equity, paying down the mortgage directly increases the ownership percentage. As the mortgage balance decreases, equity increases. Similarly, home value appreciation enhances equity because it increases the market value of the property, leading to a greater difference between the value and the mortgage balance.

Making renovations can also positively affect home equity, as improvements to the property can lead to an increase in market value, thereby boosting equity.

In contrast, increasing loan balances reduces a homeowner’s equity. When a homeowner has a higher loan balance, the amount of equity they possess diminishes, as equity is the difference between the home’s current market value and the total debt secured against it. Thus, increasing loan balances acts against the growth of equity, making it the factor that does not contribute to increasing a homeowner's equity.